Honda has cancelled the new NSX as part of a radical restructuring of its car making business.

The V10-engined supercar, which was a direct challenge to Ferrari and Porsche, would have been the most powerful production car that the company had ever produced.

Honda CEO Takeo Fukui announced the move in his end of year speech, saying that all development of the car would be cancelled. The company has also withdrawn its plan to introduce the Acura brand to Japan in 2010.

The Honda boss had previously emphasised the importance of the NSX to Honda's brand, unequivocally telling Autocar at the end of last year: "The new supercar is necessary for Honda."

Fukui had decided to concentrate on Honda's environmental credentials. He believes that hybrid drivetrains offer "the most realistic path for CO2 reduction at this moment". This means that Honda will focus its energy on developing hybrid technologies and "achieving mass market penetration as soon as possible".

The cancellation of the Honda NSX will come as a bitter disappointment to fans of the old model, which finally went off sale in 2005, after 15 years in production.

Read Andrew Frankel's blog on the Honda NSX

Read Chas Hallett's blog on the Honda NSX